Month: July 2024

The auto finance industry is experiencing significant transformations driven by market dynamics, consumer behavior, and technological innovations. Here are the key trends shaping the future of auto finance, focusing on the implications for Buy Here Pay Here (BHPH) dealers and the role of Conversational AI and contact center automation in streamlining operations, which will help the industry navigate turbulent times.

Key Trends

Increased Vigilance Required for BHPH Players

The demand for used cars has surged, putting pressure on BHPH players to be more cautious and vigilant about their loan approvals and collection processes. With the rise in used car sales, BHPH dealers must maintain stringent oversight to mitigate risks associated with subprime auto loans. Effective loan management and collection strategies are crucial in ensuring financial stability and minimizing delinquencies.

Negative Equity and Rising Debt

Negative equity on car loans is emerging as a major concern. As car prices stabilize, many buyers are left with higher-than-average debt, resulting in them being underwater on their loans.

Rising Used Vehicle Loan Rates

Used vehicle loan rates have increased, averaging a 23 basis point (bps) rise year over year. This could potentially lead to higher delinquency rates and higher repossessions.

Longer Loan Terms at Record Levels

Both 60-month and 48-month auto loans are at their highest levels in the last 15 years. This shift towards longer loan terms makes monthly payments more affordable and may extend the repayment period. Without an efficient collection strategy, it may become difficult for auto finance companies to recover the loans. 

Near Record-High Amounts Financed

The average amount financed for auto loans is nearing an all-time high of around $40,000 USD, reflecting the rising costs of vehicles.

Affordable New Car Rates and Transaction Trends

According to Moody’s Affordability Index, while the average transaction price for new cars has declined in 31 months due to more affordable rates in 2024, it remains one of the highest in a decade. This indicates a shifting market where affordability is improving, but high transaction values persist. 

The Solution to Overcome the Current Environment: Contact Center Automation with Conversational AI

As the auto finance industry faces various challenges—from rising loan rates to increased negative equity—innovative solutions for a compelling collection are more critical than ever. Contact center automation with Conversational AI has emerged as a powerful tool for auto finance and BHPH companies.

Inbound Contact Center Automation: Enhancing Consumer Experiences

Zero Wait Time: Traditional Contact centers often frustrate consumers with lengthy IVR menus and extended wait times, leading to high drop-off rates. With an average of 15% to 20% of consumers dropping off at the IVR menu, there is a significant loss of collection opportunities. Implementing conversational AI systems like Skit.ai, which provide contact center automation, can eliminate wait times and enhance consumer satisfaction by providing immediate assistance.

Personalized Consumer Interaction: Conversational AI integrates with existing CRM systems to offer a personalized approach to consumer service. This integration allows the AI to recognize the consumer’s identity and recall previous interactions, providing a seamless and customized experience. Such systems can fetch consumer profiles in milliseconds, improving the efficiency and effectiveness of the service.

Best Engagement Channels: Today’s consumers are less likely to answer calls from unknown numbers, with over 90% ignoring such calls. Engaging consumers through SMS and voice can lead to higher response rates, as text messages have double the response rate of voice calls. Offering payment channels through both mediums can improve engagement and collection rates.

Read our blog: Automate Your Auto Finance Collections with AI-Powered Text Messaging

24/7 Inbound Support: The lack of support over weekends often leads to missed collection opportunities. By providing 24/7 consumer support, auto finance companies can ensure continuous engagement and reduce the chances of delinquencies.

Outbound Contact Center Automation: Maximizing Engagement and Recovery

Increased Attempts and Engagement: Higher engagement is essential for ensuring timely payments. Infinite scalability in outbound contact center automation allows for more attempts to contact consumers, which is crucial for BHPH players who cannot afford prolonged delinquent cycles. Increased engagement during the DPD 0-21 phase can significantly enhance recovery rates.

Prioritizing Loan Payments: Engaging consumers over weekends can prevent auto payments from being deprioritized. Most consumers get paid on Fridays, and without engagement, they may spend on non-discretionary items. Automated calls over the weekend can remind consumers of their auto payments, reducing Monday delinquencies.

Multichannel Payment Integration: Offering multiple payment channels and automating collections through phone payments can streamline the process. Integrating card-on-file or user-defined card options and setting up auto payments can improve collection efficiency.

Payment Negotiations and Alternative Plans: Consumers facing unforeseen events such as job loss or medical expenses need proactive engagement. Offering alternative payment plans based on their payment history can enhance consumer satisfaction and ensure better recovery rates.

Benefits of Using Skit.ai for Contact Center Automation

Experience and Trusted Name: Skit.ai is a trusted name in the auto finance industry, featured among the top 500 companies in Auto Remarketing. It collaborates with renowned names such as Veros Credit, PeakBHPH, and Sensible Auto, ensuring credibility and reliability.

Low Lift Integration Effort: Skit.ai offers seamless integration with built-in dialer platforms and CRMs like DealerSocket- IDMS and Automaster. It also integrates with common payment gateways such as PayNearMe, making the transition to automated systems smooth and efficient.

Conclusion

Integrating Conversational AI and contact center automation is not just a technological upgrade but a strategic shift toward a more efficient, consumer-centric, and financially robust collection model. Companies that embrace these technologies will be better positioned to navigate the complexities of the modern auto finance landscape, stay ahead of the competition, and deliver superior experiences to their consumers and stakeholders.

As the auto finance industry evolves, adopting conversational AI and contact center automation will be key to enhancing operations, providing a better consumer experience, and improving recoveries with minimal effort.

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Curious to learn more about how Skit.ai’s Conversational AI can maximize your account penetration? Book a free demo with one of our experts.

The auto finance industry, a crucial pillar in the automotive market, experienced a turbulent Q2 in 2024. The rise of delinquent accounts in subprime lending has become a significant concern for industry stakeholders. Subprime lending, which targets borrowers with lower credit scores, is inherently riskier, and recent economic pressures have worsened these risks. This blog delves into the current landscape of the auto-finance industry, especially last quarter Q2, and discusses how the industry can tackle this concern.

Subprime Lending in the Auto-Finance Industry

Subprime lending involves offering loans to borrowers with lower credit scores, typically below 620. These borrowers are considered higher risk due to their credit history, including previous delinquencies, defaults, or bankruptcies. Lenders often charge higher interest rates and fees to compensate for the higher risk. In the auto-finance industry, subprime loans enable a broader demographic to purchase vehicles. However, this lending segment is also more vulnerable to economic fluctuations.

The Current Landscape: Delinquent Accounts on the Rise

In 2023, the auto loan delinquency ratio at U.S. banks reached its highest level in the past decade. According to S&P Global Market Intelligence data, the delinquency ratio at U.S. banks was 3.32% at the end of 2023, the highest since 2013. This increase occurred even though the industry’s total amount of auto loans fell to $530.38 billion from $548.40 billion in 2022, marking the first year-over-year decline since 2013.

Fitch Ratings says delinquent accounts and net losses have been trending higher while recovery rates have fallen, signaling weakened performance across the board in Q2 of 2024. Historically, the first quarter of the year benefits from a seasonal boost as borrowers utilize tax refunds to catch up on delinquent loans. However, in 2024, this boost was notably weaker. Economic pressures, coupled with greater outstanding balances from weaker-performing assets, have diminished the positive impact typically seen from January to April.

In April 2024, the delinquent account rate stood at 5.23%, a decline from the all-time high of 6.39% recorded in February. This decrease follows the typical pattern where borrowers use their tax refunds to catch up on loan payments. However, the seasonal improvement this year was less pronounced than in previous years, with delinquent account rates at 4.67% in April 2023 and 3.86% in April 2022.

Recovery rates also suffered in April 2024, dropping to a low of 43.03%, a stark contrast to 54.96% in April 2023 and 62.51% in April 2022. This decline in recovery rates highlights the challenges lenders face in recouping funds from delinquent accounts.

Additionally, the net loss rate in April 2024 was 7.90%, significantly higher than the 6.16% observed in April 2023 and the 4.13% in April 2022. This increase in net losses underscores the financial strain on lenders within the subprime auto loan market.

What Can the Industry Do to Reduce Delinquent Accounts?

While the auto-finance industry cannot directly eliminate the rise in delinquent accounts among subprime borrowers, it can take steps to improve recovery rates. This cannot be done by simply increasing the number of collection agents. Although adding more agents might boost recovery rates to some degree, it would also significantly raise operational costs, which is not the way any company would want to go. 

So, Is There a Solution?

The answer is yes. 

Technology, particularly Conversational AI, has been a game changer for the auto finance industry. With the rising delinquencies, leveraging Conversational AI has become essential for auto finance companies to enhance their collection efforts and automate processes.

But how does Conversational AI help?

Conversational AI and automation technology can significantly enhance collection processes. By automating end-to-end collections, engaging borrowers, and ensuring compliance with regulatory requirements, these technologies contribute to higher recovery rates. A multichannel conversational AI platform can call and text customers any day of the week, engaging them in human-like conversations while maintaining compliance. It can handle the entire collections process, including customer verification, disposition capture, and payment processing, without needing agent intervention. 

Conversational AI can dial thousands of calls per minute and send thousands of SMS, ensuring scalable, comprehensive, and compliant engagement across your consumer portfolio. Conversational AI can handle inbound queries and collect payments at any time, enabling 24/7 collections without requiring agent intervention. Additionally, AI-driven analytics provide valuable insights into borrower behavior, allowing lenders to customize their strategies and enhance overall collection efficiency.

Skit.ai’s Multichannel Conversational AI

Conclusion

The second quarter of 2024 has been a turbulent period for the auto-finance industry, marked by a rise in delinquent accounts within subprime lending. While economic pressures and weaker-performing assets have aggravated the situation, the industry’s response to adopting conversational AI to help improve collection efforts offers a path to stabilization. As we move into the year’s second half, all eyes will be on how these measures impact the broader landscape of subprime auto lending.

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Curious to learn more about how Skit.ai’s Conversational AI can maximize your account penetration? Book a free demo with one of our experts.

Since the advent of ChatGPT, Conversational AI has received a significant boost across various industries. Conversational AI is no longer just automating minor tasks; it can now solve complex issues and provide meaningful resolutions to customers. This transformative technology enhances customer interactions by understanding context, emotions, and intent, leading to more personalized and effective communication.

Conversational AI has found applications across various industries, enhancing customer engagement, operational efficiency, and service delivery. In healthcare, Conversational AI facilitates patient interactions through virtual assistants that offer personalized medical advice and manage appointment scheduling. In finance, Conversational AI powers virtual financial advisors, providing real-time investment insights and transaction support. Retail utilizes chatbots for personalized shopping experiences, product recommendations, and customer support. In education, Conversational AI supports virtual tutoring and adapts learning materials to individual student needs.

Many Conversational AI companies in the US are significantly revolutionizing contact center operations. These companies offer solutions that are improving efficiency, ensuring better compliance, and enhancing customer satisfaction by leveraging advanced AI technologies. Let’s take a closer look at the top six conversational AI companies leading the way in the US.

Here are the top 6 conversational AI companies in the United States:

1. Amazon Lex
2. Freshworks
3. Sprinklr
4. Skit.ai
5. Yellow.ai
6. Kore.ai

Amazon Lex

Amazon Lex is a fully managed AI service equipped with advanced natural language models to design, build, test, and deploy conversational AI interfaces within any application using voice and text. Amazon Lex also powers the Amazon Alexa virtual assistant. Released to the developer community in April 2017, Amazon Lex can be used for a variety of conversational AI interfaces, including chatbots for web and mobile apps, as well as interactions for robots, toys, drones, and more. While Amazon Alexa Voice Services allows developers to integrate Alexa into their devices, Amazon Lex provides flexibility for end users to interact with any type of assistant or interface, not just Alexa. As of February 2018, users can define responses for Amazon Lex chatbots directly from the AWS management console.

Freshworks

Freshworks Inc., founded in 2010 in Chennai, India, is a cloud-based software-as-a-service company. It offers cloud-based tools for customer relationship management (CRM), IT service management (ITSM), and e-commerce marketing. One of its key products, the Customer Service Suite, is an all-in-one conversational AI customer support solution that enhances business-customer interactions. The suite enables personalized self-service experiences with conversational AI-powered chatbots, helping businesses optimize operational efficiency and deliver exceptional customer support. The Customer Service Suite equips businesses to anticipate customer needs and deliver unparalleled service experiences by providing a comprehensive view of customer conversations and integrating various tools using conversational AI.

Sprinklr

Sprinklr is an American software company based in New York City that develops a SaaS customer experience management (CXM) platform. The Sprinklr platform integrates various applications for social media marketing, social advertising, content management, collaboration, employee advocacy, customer care, social media research, and social media monitoring.

Sprinklr has integrated AI across four product suites: Sprinklr Service, Sprinklr Social, Sprinklr Marketing, and Sprinklr Insights, along with self-serve offerings. This unified platform, built on a single codebase with an operating system approach, provides customers with the tools they need to deliver exceptional experiences. By enabling seamless collaboration among customer-facing teams, markets, and geographies, Sprinklr offers brands a unified digital edge.

Skit.ai

Skit.ai is the leading Conversational AI company in the accounts receivables industry, enabling collection agencies and creditors to automate collection conversations and accelerate revenue recovery. Skit.ai’s suite of multichannel solutions—featuring voice, text, email, and chat in both English and Spanish, powered by Generative AI—interacts with consumers via their preferred channel, elevating consumer experiences and consequently boosting recoveries. Skit.ai has automated collection calls for many collection agencies in the US and several major banks in India.

Skit.ai is revolutionizing the accounts receivables industry by enabling companies to automate and accelerate consumer interactions at scale using Conversational AI. By integrating existing dialer systems, seamless conversational capabilities powered by Generative AI, and fast campaign analytics, Skit.ai’s suite of multichannel Conversational AI solutions retains context across channels, boosting efficiency and elevating consumer experiences.

Skit.ai has received several awards and recognitions, including the BIG AI Excellence Award 2024, Stevie Gold Winner 2023 for Most Innovative Company by The International Business Awards, and Disruptive Technology of the Year 2022 by CCW. Skit.ai is headquartered in New York City, NY. 

Yellow.ai

Yellow.ai, formerly known as Yellow Messenger, is a multinational company headquartered in San Mateo, California, specializing in customer service automation using Conversational AI. Founded in 2016, the company provides an AI platform designed to automate customer support experiences across chat and voice channels. Supporting more than 135 languages and over 35 channels, Yellow.ai has become a global leader in generative AI-powered enterprise customer service automation. Yellow.ai’s platform helps enterprises achieve exceptional efficiency in customer service while significantly reducing operational costs. Their solutions cater to customer support, employee experience, and sales across BFSI, retail, and healthcare industries. The platform features an enterprise-grade conversational AI system with a no-code builder, making it accessible and adaptable for various business needs.

Kore.ai

Kore.ai develops an enterprise conversational AI and generative AI platform designed to help organizations design, develop, test, and manage chatbots for both internal and customer-facing scenarios. The company’s innovative platform, no-code tools, and solutions deliver comprehensive customer and employee experiences, from automated to human-assisted interactions, and support the creation of generative AI-enabled applications. Kore.ai adopts an open approach, allowing companies to select the LLMs and infrastructure that best suit their business needs and assists customers in navigating their AI strategy. With a strong patent portfolio and recognition as a leader and innovator by top analysts, Kore.ai is headquartered in Orlando and supported by a global network of offices.

DISCLAIMER
This list is based on subjective research and experiences, along with information gathered from various online sources, including web articles and search engine results; it is not intended to imply any specific ranking order and should be used solely as a reference guide.

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Curious to learn more about how Skit.ai’s Conversational AI can automate your contact center operations? Book a free demo with one of our experts.